Intel shares suffered their worst selloff in more than 40 years after the company on Thursday issued a quarterly revenue outlook that fell short of analyst estimates, hurt by weak demand for personal computer processors and supply chain problems in its high-margin data center components.
Intel said Thursday it expects fourth-quarter revenue of $15 billion to $16 billion. Data compiled by Bloomberg showed analysts had expected an average of $17 billion, with some forecasts even exceeding $18 billion. Excluding certain items, fourth-quarter earnings per share are projected at 25 cents, while Wall Street had expected 43 cents.
Intel is grappling with a severe downturn in the personal computer market. Its main customers, laptop and desktop makers, are facing memory chip shortages and surging component prices, which have led to lower PC shipments and weakened user demand.
Intel Chief Executive Lip-Bu Tan said the company's data center business would have performed better were it not for shortages of some raw materials and a production halt at a plant in Israel. Intel is working to resolve these supply issues. "We can't meet customer demand, and that is something that disappoints me somewhat," Tan said in an interview. Turning to the PC market, he said: "One of the main challenges is memory chips. Memory chip prices have risen a lot. I expect that by 2027 this will become a very serious problem for all of us. It's not just us — the whole market is being affected."
Intel expects the PC market downturn to last at least through the first half of 2027, with the market shrinking 10% next year after already declining 12% in 2026. Over the longer term, however, the company remains optimistic about product demand and is increasing spending on new equipment to boost output. Tan said the company is growing more confident about attracting other chipmakers to use Intel's factories to produce chips.
Intel fell as much as 30% on Friday to $64.11, marking its biggest intraday drop since 1982. The company's third-quarter revenue rose 21% to $16.5 billion, in line with the analyst average estimate. For the quarter ended Sept. 26, earnings per share were 52 cents, above the 41 cents analysts expected.
Revenue at Intel's data center and AI division rose 78% to $7.3 billion. Revenue at its client division, which makes personal computer chips, fell 5% to $8.1 billion. This mixed picture shows the dual impact of the AI boom on Intel's business. On one hand, data center infrastructure buildout is driving demand for Intel processors; on the other, it has caused a shortage of memory chips. Such chips are produced by companies including Samsung Electronics, SK Hynix and Micron Technology. The memory chip supply shortage has in turn pushed up laptop and desktop prices, eroding demand for Intel chips used in those products.
Revenue at Intel's foundry division was $6.7 billion, up 58% year over year. The business is trying to compete in a market dominated by TSMC. Intel's third-quarter gross margin was 43%, and the company expects it to narrow to 38% this quarter.
Comments